Wednesday, December 15, 2010

How should health care be reformed? Well, the Kinky Economist has a plan that provides for both universal health care and the best damn health care that money can buy. The first major component is government provided health care available to anyone. This public plan would be modeled on the VA system where the government owns the hospitals and the doctors and nurses are employees of the government, so members would not be able to choose their own doctor. If you want to choose your own doctor, pay for it yourself (or buy your own insurance). There is no right to choose your own doctor.

The plan would focus on preventative care where annual check-ups are not only free, but you could get paid for a healthy lifestyle. So much of our health care costs, especially diabetes, heart disease, and respiratory problems, are driven by behaviors such as obesity, inactivity, and smoking. By focusing on wellness, these costs can be avoided (although healthier lifestyles do result in higher costs due to increased life expectancy and chronic diseases in old age).

Chronic and catastrophic health care would be rationed by Quality Adjusted Life Years (QALYs). For instance, the government may pay up to $40,000 for treatment that extends a patients life by one year, so the cost per QALY would be $40,000. Yes, health care will be rationed -- it is already rationed. Every scarce resource is rationed. If you don't want the plug pulled on Grandma. then pay for her health care. You shouldn't demand that other people to pick up the tab if you're not willing to pay the costs. If QALYs are used to ration health care, then how much are we willing to pay to save a life? More accurately, how much are we willing to make someone else pay to save a stranger's life? The budget for health care must be limited to a percentage of the total government budget. Once a fixed dollar value has been created, the cost per QALY will depend on how many people are in the government plan and how much health care they need. The government plan is meant for the poor and the sick, not the healthy and the wealthy. If more people get their own insurance, then the available funds can be spread among fewer participants resulting in higher costs per QALY. The plan can also accept contributions from donors that would increase the cost per QALY.Another focus of the plan is positive externalities of health care. The plan could require patients to be immunized resulting in a reduced likelihood that other people will get sick. The plan could strongly encourage organ donation to help save other lives. The plan could be used for research on new medical techniques and drugs. All of these characteristics result in social benefits.

Another focus of the plan is cost containment. Treatments would be based on comparative effectiveness so that costly, ineffective treatments are avoided. Medical malpractice costs would be eliminated or at least drastically reduced by not allowing patients to sue or instituting a program to resolve these disputes. Generic drugs would be prescribed instead of brand names in order to lower pharmaceutical costs. The plan would also use it's size to negotiate better terms for prescription drugs, medical equipment, and other purchases.

There would also be a greater reliance on medical personnel other than doctors such as Physician Assistants and Nurse Practitioners. Additionally, employment in the system could be worked into programs for medical and nursing schools. For example, tuition is free at military academies such as West Point, but students are required to give four years of duty after graduation. The GI Bill will pay for college for soldiers after they leave the service. The federal government could pay for medical school with a requirement that the doctors work in the system after graduation.

The public plan is not for everyone and most Americans can and should get their own insurance, just as they do today. However, the health care system does have flaws and room for improvements. The primary downfall of the plans that seem to be bandied about is the insistance on a single level of health care resulting in either reduced levels of care and/or higher costs. By recognizing that everyone deserves basic health care but not necessarily Cadillac care, I believe that the KinkyCare framework has the best potential to improve health care coverage and results.

About Me

Hi, I'm Dr. Mark A. Swanstrom, CFA and this is my blog. This blog includes essays on current economic, political, and financial issues or whatever else I might be thinking about. I also post parts of the book I'm working on, Kinky Economics. I try to post items twice a week. Please feel free to comment and assist me on this undertaking.